Bandhan Bank reported a net profit of ₹372.00 crore for Q1 FY26, down 65% from ₹1,063.00 crore in Q1 FY25, though up 17% sequentially from ₹318.00 crore in Q4 FY25. The bank's performance was impacted by challenges in the Emerging Entrepreneurs Business (EEB) segment, which includes microfinance loans.

Key Financial Highlights

• Gross advances stood at ₹1.34 lakh crore with 6% YoY growth
• Total deposits grew 16% YoY to ₹1.55 lakh crore
• Net interest income fell 8% YoY to ₹2,757.00 crore
• Net interest margin (NIM) at 6.4%, down from 6.7% in Q4 FY25
• Gross NPA stood at 5.0% and Net NPA at 1.4%
• Capital adequacy ratio remained strong at 19.4% with Tier I capital at 18.6%
• Return on Assets (ROA) was 0.8% and Return on Equity (ROE) was 6% on an annualized basis

Segment Performance

The EEB portfolio declined 15% YoY to ₹52,812.00 crore due to industry guardrails implementation. However, the non-EEB portfolio grew 27% YoY and now accounts for 60% of total advances. The secured loan portfolio grew 29% YoY and now constitutes 52% of total advances.

Deposits and Liabilities

Retail term deposits demonstrated strong momentum, growing by 34% YoY. CASA deposits now account for 27% of the total deposit base. The overall share of retail deposits (CASA + Retail Term Deposits) remains steady at 68%.

Asset Quality

The bank undertook technical write-offs of ₹1,047.00 crore during the quarter. Gross slippages at the overall bank level declined to ₹1,553.00 crore in Q1 FY26 compared to ₹1,748.00 crore in the previous quarter. The Provision Coverage Ratio (including technical write-offs) improved to 87.3%, compared to 86.5% in the previous quarter.

Management Commentary

Partha Pratim Sengupta, Managing Director and CEO of Bandhan Bank, stated, "Despite these headwinds, we are performing reasonably well when benchmarked against industry peers & competitors with sequential improvement in our financial performance. We anticipate challenges in the EEB segment to persist until the second quarter of FY26, albeit on an improving trajectory."

The bank expects to witness a gradual and steady recovery in the EEB segment over the coming months, with a positive bias emerging in the second half of the fiscal year. Management guidance suggests credit costs may improve to 2.5% for the full year FY26.

Outlook

Bandhan Bank remains focused on prudent risk management, identifying new avenues for growth, and enhancing operational efficiency. The bank is expanding its retail liability sourcing capabilities and has successfully enabled all 4,400 banking units to offer retail term deposits. The management expects overall loan growth of 15-17% for FY26, with EEB portfolio growth projected between 5-8%.

As the microfinance environment continues to stabilize, Bandhan Bank is confident in its ability to leverage emerging opportunities while maintaining its strategic focus on balance sheet resilience and funding stability.

Bandhan Bank has unveiled its strategic plans for the coming years, focusing on sustainable growth and a shift towards secured lending. The bank aims to achieve a 15-16% loan book growth in fiscal years 2026 and 2027, marking a significant change in its lending approach.

Shift Towards Secured Lending

The bank has made substantial progress in increasing its secured loan portfolio, which has grown from 48-50% to 52%. This shift represents a strategic move to balance the bank's risk profile and ensure more stable long-term growth.

Moderation in Microfinance Growth

Bandhan Bank, known for its strong presence in the microfinance sector, is expecting a moderation in this segment's growth. The bank projects microfinance segment growth to slow down to 8-10% in FY26, a notable decrease from its previous aggressive expansion strategy.

Financial Performance and Outlook

The bank has maintained its full-year credit cost guidance at 2.5%. However, it anticipates some fluctuations throughout the year:

• Q2: Expected credit cost of 3%
• Q4: Potential tapering to 2%

Bandhan Bank reported mixed financial results for the first quarter of FY26:

Challenges and Adaptations

The bank faces pressure on its net interest margins due to rising funding costs. To counteract this, Bandhan Bank has implemented strategic rate hikes:

• Last quarter: 25 basis points increase
• From July: 75 basis points increase

Industry Impact

New regulatory guidelines implemented from April 1 have impacted industry growth. However, the bank reports improvements in delinquencies and slippages, indicating potential positive outcomes from these regulatory changes.

Bandhan Bank's strategic shift towards secured lending and moderated growth in microfinance signifies a mature approach to sustainable banking in a changing regulatory environment. As the bank navigates these changes, its performance in the coming quarters will be crucial in determining the success of its new strategy.